On Thursday October 23, 2025, the Financial Industry Regulatory Authority (FINRA) announced a targeted sweep aimed at small-capitalized (“small-cap”) exchange-listed issuers1 with ties to business operations in foreign jurisdictions, such as China. Specifically, FINRA intends to review firms involved with multiple small-cap offerings as either an underwriter, bookrunner, syndicate member, selling group member or placement agent. Additionally, this sweep applies to firms that have participated in initial and/or secondary market trading related to relevant small-cap offerings.
FINRA seeks such firms to disclose information, including items listed below where relevant, for the period of January 1, 2023, through September 30, 2025.
Disclosure
Expected disclosure from firms that have participated in multiple small-cap offerings as either an underwriter, bookrunner, syndicate member, selling group member or placement agent, as relevant to small-caps offerings include:
- Firm’s written supervisory procedures;
- Any compliance policies, manuals, training materials, compliance bulletins, and any other written guidance in effect;
- Lists identifying each small-cap offering in which the firm participated including, among other things, the name of issuer, type of offering, the firm’s role, share price, and number of shares issued;
- Copies of engagement agreements, advisory agreements or other contracts to which the firm was a party.
Expected disclosure from firms that have participated in initial and/or secondary market trading related to small-cap offering include:
- Copies of all versions of the firm’s written anti-money laundering compliance program;
- Firm’s written supervisory procedures relevant to securities trading and any compliance policies, manuals, training materials, compliance bulletins, and any other relevant written guidance;
- Lists of all tools that the firm used for supervision of trading, and to detect and cause the reporting of suspicious activity (or attempted activity) in connection with: (a) the account opening process; (b) the deposit or delivery-in of shares; (c) trading; (d) money movements; (e) unauthorized access to customer accounts (e.g., account intrusions); and (f) ongoing customer due diligence.
In recent years, FINRA has showed continued interest in small-cap offerings based in foreign jurisdictions. Notably, in its 2025 Annual Regulatory Oversight Report, FINRA reported observing significant, uncommon price increases close to initial public offerings (IPO) usually involving small-cap, exchange-listed issuers with operations in foreign jurisdictions. The agency noted that this potentially indicated acts of market manipulation or “ramp and dump” schemes that could be utilized to defraud investors.
Conclusion
Broker-dealers engaged in the offering or trading of small-cap issuers with businesses operating in foreign counties should expect to be examined by FINRA in connection with this sweep. Firms are well-advised to conduct proactive reviews of their written policies, procedures, and controls—including those related to monitoring for suspicious activity, in connection with small-cap foreign issuers.
1 Defined as “Initial public offerings that raise $25 million or less and are priced between $4.00 and $8.00, and follow-on offerings and private placements involving those issuers.” FINRA Targeted Examination Letter on Small Capitalization, October 2025.
